Ecorse provides
empirical evidence of the potential benefits of privatization in the
Downriver region.

Three years ago, Ecorse
teetered on the brink of economic bankruptcy, the result of a $6 million budget
deficit incurred by local elected officials. Today, Ecorse's budget deficit has
been reduced to $1 million largely through privatization. The city appears to be
headed toward full fiscal restoration, but the defeat April 18 of a new city
charter designed to prevent financial abuse means the outcome has by no means
been decided.

Ecorse public services that
have been privatized include:

Department of Public
Works. Debris removal; park and
sign maintenance; street, sidewalk and alley maintenance; street sweeping;
snow removal; tree cutting; water meter reading; water and sewer system
maintenance; weed cutting; and vehicle maintenance have been contracted out.
The DPW Building and all equipment have been sold, and the proceeds used to
reduce the budget deficit.
[22]

DPW privatization has saved Ecorse $35,000 monthly, an
annual savings of $420,000. The city pays $75,000 monthly, or $900,000 annually,
for DPW services, according to Schimmel.
[23]

Administrative
expenses. Contracted out.

Ambulance billing.
Contracted out.

Animal control
has been contracted to the neighboring City of River Rouge for $20,000 –
nearly half the $45,000 that Ecorse once paid for one animal control officer.

Surplus city buildings and land have been sold, including the ice arena, named
after still-living former Mayor Richard Manning. The ice arena was sold for
$185,000, and now houses a successful business operated by a private
entrepreneur. The community center, health center and rowing club have been
leased out, producing a savings on insurance and utility costs.
[24]

Garbage collection had
already been privatized, but the contract was renegotiated to save taxpayers
$120,000.
[25]

Few,
if any communities nationwide have experienced privatization to such a degree as
in Ecorse. Indeed, Ecorse is evidence of a private sector economic experiment
unique in recent American history. "We have created a model city that nobody
else in the country has," explains Schimmel. "Some communities have privatized
certain functions. I've privatized just about everything. Everything that I
could legally."

The
outside observer may ask, "How did such a degree of privatization occur in
Ecorse?" After all, privatization is frequently characterized as a "Sunbelt
idea," while Downriver is synonymous with the so-called "Rust Belt." It is clear
that fiscal mismanagement by Ecorse officials led to privatization. A review of
the salient historical facts establishes that point.

Wayne
County Circuit Court Judge Richard Dunn appointed Schimmel as receiver for
Ecorse on Dec. 3, 1985, after local officials created a budget deficit of $6
million through fiscal mismanagement.
[26] The city's problems can be traced to
the late 1970s when Great Lakes Steel Corp., the major taxpayer, found itself
weakened by recession and an inability to compete in world economic markets.

Elected officials in nearby Gibraltar (McLouth Steel) and Trenton (Chrysler)
faced a similar economic crunch, but raised taxes or reduced expenditures to
offset declining revenues. Ecorse officials did not follow course and the city
was millions of dollars in debt by the
early 1980s. Creditors like Detroit Edison filed suit against Ecorse and the
cases were consolidated in Wayne County Circuit Court before Judge Dunn.
[27]

Schimmel implemented
privatization as a solution after repeated efforts by Dunn to force officials to
address the $5 million budget deficit which had driven the community to the
verge of economic bankruptcy. For example, in June 1985, Judge Dunn ordered
officials to adopt a balanced budget and instructed the city "to operate each
quarter within its revenues for such quarter as budgeted."
[28]

In March 1986, Dunn ordered
city officials to show cause why they "should not either immediately reduce
spending or increase revenues to achieve compliance" with his earlier order. In
June 1986, Dunn ordered Ecorse officials to "pass on and adopt a balanced budget
for the 1986-87 fiscal year or. or before July 1, 1986," and submit the document
by that date.
[29]

Local 1008 of the Michigan
Association of Federal, State and Municipal Employees petitioned to intervene in
the case, along with Ecorse through its attorneys. Dunn granted the petitions.
Shortly thereafter, it was revealed that the city's projected operating deficit
for FY 1985-86 "might exceed $750,000." On July 8, Dunn urged city officials at
a conference to "conduct negotiations with its unions in an effort to formulate
a balanced budget for" FY 1986-87.
[30]

On July 19, 1986, an Ecorse
official reported to Dunn that a balanced budget had not been adopted. On July
22, Dunn granted the city's request for a two-month grace period to compile a
budget. Between July 22 and Sept. 23, 1986, meetings were held between Ecorse
officials and union representatives. On Sept. 23, a city official reported to
Dunn that a balanced budget had not been adopted. Dunn found Ecorse in
non-compliance with previous court orders, and appointed Schimmel receiver for
the city.
[31]

Thus, Ecorse became the
first city in Michigan history to be placed in receivership. Dunn ruled the
receivership was necessary "because other less drastic measures have failed to
work in the past or have merely resulted in impasse."
[32] Schimmel accepted the
position after receiving a guarantee from Dunn that he would have complete
freedom to implement measures necessary to put the city's financial house in
order.

"I told Judge Dunn I didn't
want the (receiver's) job if I had to do what the typical politician has to do,
which is make promises and then chase the taxpayers' money to keep them. That's
how Ecorse got in the mess that it is in today in the first place," Schimmel
said.
[33]

First, Schimmel discharged
40 paid political employees. "Cost was not important in Ecorse even though they
were near-bankrupt. Having their political buddies, cronies, relatives and
friends on the city payroll had become more important than the taxpayer," he
said.
[34] Ecorse had 140 public employees when Schimmel was appointed receiver.
By early 1989, he had reduced the public workforce more than 60 percent through
privatization.

Next, Schimmel privatized
the 34-member Ecorse Department of Public Works. He considered privatization of
the police department but he found that state law prevented him.
[35] Schimmel
attempted to contract out police protection to the City of Detroit and the Wayne
County Sheriff's Department, but political opposition prevented the action.
Detroit Mayor Coleman Young supported the move, but was opposed by city council
members. Wayne County Sheriff Robert Ficano's supported contracting-out but was
opposed by Wayne County Executive Edward McNamara. However, Schimmel privatized
the Ecorse police pension fund, restoring sanity to a system once underfunded by
$15 million.

Through attrition, the fire
department has been reduced more than 25 percent. The current full-time force
will eventually be entirely part-time or volunteer under the fire union contract
that Schimmel was able to renegotiate. "We have a long list of
applicants for the new positions. They don't seem to mind that it's not
full-time. They just want to work," Schimmel said.
[36]

Two points emerge when
examining Ecorse privatization. First, the Ecorse example offers empirical
evidence that privatization is practical in the real world including the
Downriver area. Socialist academic critics once objected to privatization on
the grounds that public services were "natural monopolies." That theory was
discarded long ago. Today, socialists argue that privatization is "impractical,"
i.e., it cannot guarantee sufficient suppliers to permit competition. That
argument and other socialist objections do not hold up under scrutiny in Ecorse.

Second, it is clear that
Ecorse represents a major, although tentative victory for market forces.
Fiscal mismanagement has been stopped, an
out-of-control bureaucracy has been reduced, and the same general level of
services has been maintained. But property tax rates remain too high (76.72
mills)
[37] and should be reduced as soon as possible to encourage economic
development in a community plagued by double-digit unemployment.